Appunti di Loyalty Marketing dall'Università di Parma

MENSIS A.D. 962

Università di Parma: Appunti di Loyalty Marketing

Introduzione al Corso

UNIVERSITÀ
DI PARMA
Appunti di Loyalty Marketing
Università di Parma
Dipartimento di Economia
Laurea Magistrale in "Trade e Consumer Marketing"
Anno Accademico 2022/2023
Professoressa Cristina Ziliani (Loyalty Marketing)
Professor Marco Ieva (CRM and Consumer Analytics)
Esame 10 CFU

Evolution of Marketing Paradigms

Il Concetto di Marketing

Let's reflet together on the world "marketing": it's an English word also used in Italian. Of course this word
has "market" inside and it could have two different meanings: marketing is what a company does (an
activity or set of activities), but it's also a topic/field of study and research. So Marketing has two sides, it's
a social science because it's a science based on what organization and people do. In both cases "market"
is the core, the original focus of marketing. But what is a market? The physical or conceptual place where
people meet because they have to satisfy their need of exchanging goods, services, values, times, etc.
Market has always been an important field of study for economists, who try to describe how different
markets work and to understand the different origins of markets (think to what merchants did years ago).
Needs have always been satisfied with the flow of goods from the place where they are produced to the
place where they are transformed to satisfy a need and, at the end, are consumed. Lots of companies and
lots of people have to coordinate during this journey. Years ago, economists have studied how this flow of
goods works looking at the subjects that are involved. So, there have always been an interest in looking
how needs are satisfied producing goods; we know that scarcity prevailed in history until the industrial
revolution: production was not as important as merchants and trading companies.

Origini del Termine Marketing

The world "marketing" appeared for the first time in 1910 in the US Midwest Universities (Illinois, Indiana,
Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin),
this part of US's economy was - and is still nowadays - based on farmland and crops and for this reason
economists started study commodity markets and they were fascinated by the fact that they involved so
many different companies and workers cooperating. Marketing was seen as a set of economic and social
processes. Marketing was defined as "the social and economic process that makes goods move from
production to consumption". Trust needs to be established, lots of individuals are involved and for these
reasons marketing is seen as a social and economic process. This early school of thought was more
descriptive than normative. Three separate schools evolved in US that focused on:

1. The commodities themselves
2. The marketing institutions through which products were brought to market, especially brokers,
   whole-salers, and retailers in their many forms and variations (institutionalists),
3. The functions performed by these institutions, how do they set prices, how do they communicate,
   how do they are organized, and so on ... they are the 4P (functionalists).

This last 'functionalist' approach had the most success and became the conceptual framework for the
marketing discipline. In their description of the various aspects they privileged, those early approaches
shared a view of marketing as a set of social, not only economic, processes.

Marketing Management Paradigm

Definizione di Marketing nel 1948

Now let's jump from 1910 to 1948, the American Marketing Association defined the marketing as "the
performance of business activities directed towards the management of the flow of goods and services
from producer to consumer, or user". In this definition we are in a more developed society with a
completely different vision: there are not only goods but also services, marketing is considered a
"performing activity" (business activity), the concepts of "trust" and "social process" are disappeared from
the definition, the flow can be managed (i.e .: planned and controlled) by the company. Today it's an
illusion to be able to manage the flow, but the situation was different in 1948 when the flow of goods
could be managed by firms: 1948 is after the II World War where America hasn't been destroyed and
American companies where rich and based on the concept of "economy of scale". In this reality a company
3had to design a good standard product, produce it in large quantities to reduce the costs, set the price low
and try to control all the variables around. In this framework, if the environment is stable the success is
certain. And 1950s, 1960s, 1970s are very stable years, plenty of population and growth, so in these
decades was simple for a firm to control all the variables: if a company takes all the right decision,
magically, arise the success. It could be clear why in the definition there is not mention to "trust" and
"organization", because companies could control every single step of the production.

Evoluzione del Marketing Management

During the 1950s and 1960s several textbooks appeared which adopted this marketing management
perspective and focused on problem-solving, planning, implementation and control as the essence of
marketing. There is a big switch from a descriptive approach to a normative one. The adoption of the
behavioral and quantitative sciences gave important legitimacy to marketing as a separate academic
discipline.

Caratteristiche del Marketing Management Paradigm

This idea of marketing is the very first conceptualization of marketing being popular among managers, and
we call it "Marketing Management" paradigm:

1. Marketing is a set of activities, not a social process.
2. It is performed by the industrial firms that are manufacturers.
3. It takes the form of scientific solutions to specific problems collecting data and using math, science
   and economy to set all the variables in a right way.
4. The attention is on problem solving, planning and control
5. The principal company's goal was to maximize profit > they said that what is good for the
   company is good for America and lots of markets were monopolies (neoclassical economic
   approach).
6. Success is measured by sales volume and market share in volume or in value (today companies
   look at market share but also at "retention rate", that is the % of costumers that continue to buy
   from the company when time passes. This is an incredible change because retention rate is based
   on customers, and not on products, this implies that there is a new paradigm today both for
   companies and for investors. Market share is an information about "today", but it doesn't say
   nothing about the future, on the contrary the retention rate is an information of the possibility of
   growth "tomorrow").
7. The relevant viewpoint was "the transaction" (i.e. the individual sale), companies didn't care if
   they lose one buyer because demand was growing (while it's different in case of matured markets)
   and the mentality was like "closing a deal today without thinking about the future", we call this
   the "single transaction mentality".
8. Companies needed specialists and experts, a team of people who could work in this filed and take
   these types of decisions. At that time top American corporations had a large, hierarchical
   organization with multiple layers of management and functional specialization. In this context, the
   marketing department is born.

Compiti della Funzione Marketing

In this framework, the tasks of the marketing function were:

1. To develop a deep understanding of the marketplace to ensure that the firm was producing goods
   and services required and desired by the consumer.
2. With an optimal product mix in place, the marketing function (through its sales, advertising,
   promotion, and distribution subfunctions) was responsible for generating demand for these
   standardized products.
3. To create consumer preference through mass and personal communications
   4d) To manage the channel of distribution through which products flowed to the consumer.

Sound marketing research and analysis provided support for conducting these activities most efficiently
and effectively, for testing alternative courses of action in each area. In order to make all this mechanism
run we need predictability: you can plan something only if the variables are predictable.

Relationship Marketing Paradigm

Crisi della "Giant American Corporation"

This was true until the mid 1970s when there was the crisis of the "giant American Corporation" due to:

• Oil shock (1973)
• Flexible technology
• Advances in transport and communication
  a) The costs of transport went down all over the world, that let companies that were very far
  away from each other to trade;
• b) Costs of telephone, radio transmission, satellite transmission, internet which made
  possible people to communicate at a small price;
• Globalization: it impacts on consumer's needs, because people became aware of the lifestyle of
  other people from different places, so it meant changes in the demand, but also an intensification
  on competition. Many more brands became available, so many more competitors born.

Impatto della Crisi e Fine della Prevedibilità

The increasing costs reduced the buyer power of consumers and so the demand; the profit of companies,
that still have lots of fixed costs, went down because of the crisis. During these years companies realized
the world was becoming a global marketplace: what happened in one country directly affected what
would happen in others > "end of predictability": the inputs of managerial decision-making processes
were no longer easy to forecast or predict. Big corporations suffered the most: the larger an organization
(number of managers, analysts, and planners who were not directly involved in making or selling products)
was, the more difficult was to adapt to the new circumstances due to high fixed costs and slow decision-
making processes. The burden of administrative costs, mostly in the form of salaries for these middle layers
of management, became an increasing handicap in the competitive races that shaped up in the global
marketplace of the 1970s and 1980s.

Nuove Forme Organizzative e Partnership

A clear evolution takes place away from arm's-length transactions and traditional hierarchical,
bureaucratic forms of organization toward more flexible types of partnerships, joint ventures, alliances,
and networks. These partnerships were characterized by flexibility, specialization and an emphasis on
relationship management instead of market transactions. Within these new types of organizations,
traditional ways of organizing the marketing function and of thinking about the purpose of marketing
activity must be reexamined, with focus on long-term customer relationships, partnerships, and strategic
alliances. Economists started to study which types of industry could resist to the crisis and found 2 different
models:

1. The first is born in Italy, Germany and UK where we can see a lot of industrial districts: they were
   graphically defined productive systems, characterized by a large number of small familiar firms
   involved at various stages, and in various ways, in the production of a homogeneous product. They
   were typically high-specialized skills and knowledge, cooperating to meet the needs of the
   demand. This model is very resilient during disruption and uncertainty and for this reason it
   spreads in all the world. Note that this model is based on trust > All district's participants must
   accept a set of moral values, such as honesty, loyalty and hard work. Advantages: spatial proximity,
   exchange of knowledge.
   5